Delivery Wars: UPS looking to weather Amazon logistics onslaught

United Parcel Services, Inc. is girding its loins for battle as Amazon continues on its path toward global logistics domination. For 2020, UPS will more than double the number of weekend deliveries. UPS only recently added Sunday delivery to its schedule after FedEx did the same thing last year. In the meantime, Amazon continues to speed up its free delivery.

UPS has admitted to seeing a spike in e-commerce during weekends and it wants to better serve the retailers who need faster delivery. The big brown vans only started year-round Saturday hours as recently as 2017. Now the goal is to reach 40 million deliveries on Saturday.

Between 2013 and 2019 US weekend deliveries doubled to reach 13.5 million units. That accompanied a 127% increase in online retail sales, which were nearly $591 billion in 2019.

While Amazon is driving the push for faster delivery, UPS is in the odd position of being both competitor and partner. 20% of UPS business comes from Amazon, and the move to increase weekend deliveries is, in part, a play to keep Bezos and company satisfied. With the meteoric growth of Amazon’s delivery business, there is always the risk that it will fire UPS and FedEx and carry out all delivery in-house.

At the same time, UPS is working hard to get retailers involved for the purpose of selling directly to e-commerce customers. This move is potentially threatening to Amazon’s growth plan, and it is unclear how this may impact the revenue stream UPS enjoys. It should be noted, however, that Amazon keeps the best delivery jobs for itself, such as high-volume urban deliveries which have a high profit margin. The work farmed out to UPS usually includes the less-efficient rural deliveries where fewer packages are delivered per hour. 

As a result, UPS is paying a weekend wage of $32/hour, which is 15% below the weekday driver rate. UPS hopes it has the right model to decrease costs enough while still being able to attract employees. 

Amazon is not slowing down anytime soon and the brunt is being felt by FedEx and UPS. The latter had to cut its profit forecast for 2020, and the former is similarly on the ropes. But with the expansion of weekend deliveries and careful wage structuring, UPS is showing that it won’t go down without a fight.